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GOLDMAN SACHS: Businesses around the world are undergoing a $127 trillion revolution in how they spend money, and these 11 tech stocks will profit the most
GOLDMAN SACHS: Businesses around the world are undergoing a $127 trillion revolution in how they spend money, and these 11 tech stocks will profit the most
Akin OyedeleSep 17, 2018, 21:45 IST
A worker demonstrates Apple Pay inside a mobile kiosk sponsored by Visa and Wells Fargo to demonstrate the new Apple Pay mobile payment system on October 20, 2014 in San Francisco City.Justin Sullivan/Getty
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Businesses around the world pay each other about $127 trillion every year, and the process is still bogged down by paperwork and administrative costs.
According to a report from Goldman Sachs, there's $1 trillion in revenue to be earned by companies such as credit-card networks that digitize and cheapen the business-to-business payments process.
The analysts listed 11 publicly traded companies at the forefront of this opportunity.
A $1 trillion opportunity is open for companies that get in front of changing how businesses make payments, according to Goldman Sachs analysts.
That's how much revenue Goldman Sachs analysts estimate banks and payments processors can earn from improving how businesses worldwide settle their accounts payable.
"With the vast majority of invoices still processed manually and paid by paper check, we see significant opportunities for business to reduce costs - creating new revenue pools for payment and software companies entering the market with faster, lower-cost invoice processing and payment solutions," the analysts led by James Schneider said in a report released Sunday.
Business-to-business payments add up to $127 trillion in flows, and could nearly double to an estimated $200 trillion by 2028, the analysts said.
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Small businesses should see the most cost savings as they adopt more digital solutions like automatic invoice processing (versus manually capturing all the data). North American businesses spend an estimated $510 billion every year on payments to suppliers, including costs like labor, foreign transaction fees, and interest on short-term loans, the analysts said.
"While thus far the digitization of B2B payment flows has been slow - especially among small business - we believe the market is finally poised to accelerate," Schneider said.
The list below features the publicly traded companies, including card networks and software providers, that Goldman believes will be most exposed to these revenues over the next five years.
Comment: "Although Mastercard ranks third in terms of commercial card volume, we think Mastercard has the most comprehensive portfolio of B2B payment products across the card networks with virtual cards, Fast ACH, and Mastercard Send. Mastercard is the leader in virtual cards and the only card network with Fast ACH, a capability it acquired in 2017 with its acquisition of the United Kingdom’s leading instant payment clearing system VocaLink."
Comment: "Visa is the global leader in commercial cards and has been working to strengthen its virtual card footprint (WEX recently partnered with Visa to strengthen its international footprint). Visa’s virtual card offering powers Stripe’s Instant Payout solution, Worldpay’s instant payment offering, and First Data’s Disburse-to-Debit solution for businesses paying contractors and temporary workers."
Comment: "AXP is the #1 commercial issuer globally, with relationships with over 60% of Fortune Global 500 and is the #1 small business card issuer in the US. AXP’s unique integrated payments platform allows AXP to have direct relationships with buyers and sellers, creating the opportunity to flexibly price and structure transactions to meet buyer and supplier needs."
Comment: "While most providers focus on either domestic or cross-border payments, FleetCor offers both domestic and international payments solutions. This gives FleetCor a unique opportunity to cross-sell its domestic Comdata and cross-border Cambridge products across its client base – especially the Comdata virtual card offering."
Comment: "WEX issues both Mastercard and Visa virtual cards, giving customers greater flexibility and a bigger international reach. WEX’s corporate payments offerings currently run on the legacy AOC and EFS platforms — with the AOC platform serving enterprises and EFS serving smaller companies — but WEX plans to create one unified platform over the next several years by lifting the best features from both platforms."
Comment: "While Square primarily provides disbursements and only recently began facilitating supplier payments, we see potential for Square to expand its offerings as it builds out its ecosystem. Over time, we also see potential for Square to offer more robust supply chain financing solutions in conjunction with Square Capital."
Comment: "WEX issues both Mastercard and Visa virtual cards, giving customers greater flexibility and a bigger international reach. WEX’s corporate payments offerings currently run on the legacy AOC and EFS platforms — with the AOC platform serving enterprises and EFS serving smaller companies — but WEX plans to create one unified platform over the next several years by lifting the best features from both platforms."
Comment: "Coupa is differentiated from competitors in the spend management space by ease-of-use and comprehensiveness of the solution. Whereas competitors may require 4-5 loosely coupled tools to accomplish similar outcomes, Coupa supports the entire business spending workflow from purchase to payment using a natively-integrated platform."
Comment: "Intuit benefits from its incumbency position and massive install base of QuickBooks customers, which provides the company with a captive audience for payments, tax prep, and more nascent offerings such as capital. The sizable installed base has also attracted a rich partner community of e-commerce and third-party payments providers including Shopify, Square, and PayPal."
Comment: "Coupa is differentiated from competitors in the spend management space by ease-of-use and comprehensiveness of the solution. Whereas competitors may require 4-5 loosely coupled tools to accomplish similar outcomes, Coupa supports the entire business spending workflow from purchase to payment using a natively-integrated platform."
Comment: "SAP’s solutions are easy to integrate with multiple accounting and other procure-to-pay solutions, making them attractive for medium- to large-scale companies. In particular, SAP’s Ariba Network has meaningful scale, connecting suppliers in over 190 countries and facilitating over $50bn in annual payment volume."
